Andrew Fairlie, Associate and Head of Construction and Projects at Turcan Connell discusses the importance of contractual terms and the ability to negotiate on the detail, helping to ensure a successful and revenue generating project.
The importance of looking at contractual terms before entering into contracts really can't be overstated. Whether it is for renewables projects, agricultural leases or commercial property development, even for large residential projects, the importance of knowing what contract you're entering into, what terms you're achieving, and who is paying for this, really are of critical importance.
There are so many points that are up for grabs in these contracts and contactors expect to be able to negotiate. Unlike buying a washing machine, it really is important to look at the particular points and ensure you have reached the best commercial deal. Examples of these points include; responsibility for weather, responsibility for delays onsite, responsibility for the interface and the interaction between the contractors and the consultants who are working onsite. Each of these points really should be exploited during the negotiation process, to ensure the client is getting the best deal.
A very good example is in relation to solar developments, and the testing and commissioning protocols, which are necessary to have these developments up and running. With the kit coming in from overseas, it won't be the manufacturer who does the commissioning of the development onsite; it will often be the installation contractor. This contractor has a direct interest in leaving the site, getting paid the last percentage of his retention and moving on to another job. However, from the client's point of view, the client wants to ensure the development is fully functioning, fully tested, and revenue-generating right from the word 'go'. These testing and commissioning protocols, therefore, should be negotiated at the outset and shouldn't be left to chance.
Moving on, the contractual strategy for these projects can be very complicated. There can be as many as six or seven different contracts all working at the same time, with one or more contractors and numerous consultants working on the same project. Any tension or dispute between these consultants and contractors, or worse still, any gaps where the client thinks they are paying for a service but, actually, this has been missed between the various parties working onsite, this can all have a detrimental effect from the project. The likely result of this, while questionable in relation to the project, will certainly cause the client additional time, and additional delay and cost can only be the result of this.
From the client's point of view, clear thought should be applied to the contractual structure at the outset and in negotiation over the various terms of these contracts to make sure there's a very good fit. Potentially, some overlap between the contracts may lead to the client paying twice for the same service. But, arguably, this is better than having a service missed and somebody 'drop the ball' as the development reaches a crucial stage. So, overall I would say, the important thing is to apply some clear thought to the contractual structure and to negotiate key terms, which the client finds important. That way the chances of a successful development will be increased.
At Turcan Connell, we have expertise in all areas relating to construction and renewables projects. As the Head of the Construction and Projects Team here at Turcan Connell, I would advise clients to get in touch, so we can discuss the structure of the contracts relating to your project and, also, think about the negotiation points we'll focus on in order to increase the chances of concluding with a successful revenue-generating project.